Helen Undy, Head of External Affairs, Money and Mental Health
Loan sharks - a personal story
Today the government announced a crackdown on loan sharks – illegal money lenders who often subject borrowers to threats, violence and intimidation, and prey on people in difficult circumstances. In our research we’ve heard from a number of victims of loan sharks, who told us what led them to borrow in this way, and the impact that it had on their mental health.
One of those people was Barbara*. A few years ago Barbara and her husband divorced, leaving her in debt and with heavy mortgage repayments. Although she was working long hours, she found herself getting into arrears. Her mental health broke down and she lost her job as a result.
Meeting a loan shark
When Barbara’s house needed urgent roof repairs she found that she just couldn’t get the money together. Barbara’s credit rating was so low that even payday lenders turned her away. Whilst they would have liked to help, her family was not in a position to do so, and Barbara was desperate. Not sure where else to turn, a friend of a friend introduced Barbara to a loan shark.
“I was under no illusion [about] where this money was coming from, but had no option in the circumstances.”
The repayment terms and interest were strict. Barbara had to pay back more than twice what she had borrowed in just two months. Despite already struggling financially, Barbara cut back on everything she could to make sure she had the money to pay.
“I hardly ate, didn’t use my car… cut back on electricity and gas and cancelled things like house insurance.”
Whilst the lender made no overt threats, Barbara was clear that the consequences of not paying would be dire. And as she wasn’t borrowing from a legal money lender, Barbara had little protection.
“I am very aware that had I not paid on time or got deeper into debt with them, anything could happen.”
Too afraid to report
On the face of it, everything seemed relatively amicable with the lender. When Barbara was still struggling financially another loan was offered, but Barbara was still struggling day to day to make ends meet. She was then offered a possible way out of all her financial difficulties:
“They wanted me to let them into my attic to grow cannabis plants and I felt pressured. I didn’t let them, but they kept offering me money for letting them grow the cannabis. Up to now I have been able to stave that off.”
Barbara felt that reporting the loan shark’s activities would have been impossible, and her ongoing situation is why she has chosen to remain anonymous today.
“Believe it or not most of the time I don’t have a death wish!”
Today the government committed £5.5m to pay for investigations into and prosecutions of illegal money lenders, as well as providing support to victims like Barbara. We welcome this move, and hope that it will be accompanied by broader action to ensure that fewer people find themselves in a financial position like Barbara’s in the first place.